COVID testing drought leads LumiraDx to cut $2B off SPAC deal value

Drops in demand for COVID-19 screening have led test maker LumiraDx to dramatically cut back its plans for going public, slashing $2 billion off the value of a planned reverse merger with a special purpose acquisition company (SPAC).

First announced in April, the U.K.-based diagnostics company aimed to join the Nasdaq through a SPAC deal with the blank-check firm CA Healthcare Acquisition and had charted out a $5 billion pro forma enterprise value for the combination.

Now LumiraDx is knocking 40% off that projected valuation, while also saying in a statement that the market environment for publicly traded diagnostic companies has changed and that it is following feedback from the SPAC’s advisors and shareholders.

By late May, COVID test producers industry-wide had begun to see their sales evaporate much faster than predicted—driven by the success of vaccines, falling case rates and U.S. government guidance saying that the fully inoculated could skip testing after exposures to the virus in certain situations.

That trend continued in quarterly earnings reports and trimmed sales forecasts for the year from Qiagen, Quest Diagnostics and Abbott, the last of which has begun to lay off hundreds of workers focused on producing its rapid antigen tests like the card-based BinaxNow.

RELATED: Abbott takes an ax to sales forecast as COVID testing dries up faster than expected

LumiraDx also reduced its revenue guidance for 2021, from the $600 million to $1 billion it had been forecasting back in April, down to $300 million to $500 million by the end of this year.

The point-of-care test maker hopes to secure as many as 10 diagnostic approvals over the next two years for its portable platform, built into a small, two-and-a-half pound device capable of running on battery power. This includes tests for tuberculosis, influenza, COVID and troponin, the protein linked to heart damage.

This summer the company obtained an emergency authorization from the FDA allowing COVID antibody and antigen tests to be run on the same platform as well as a CE Mark in Europe for a high-throughput molecular COVID test. LumiraDx also said it has increased its production capacity through a new facility in Glasgow to top 28 million total tests per month.

RELATED: British pharmacy chain sells LumiraDx 12-minute COVID test for consumer use in those without symptoms

Chairman and CEO Ron Zwanziger is set to run the company after the closure of the SPAC deal, slated for this fall. 

The Boston-based CA Healthcare, meanwhile, is backed by Covington Associates and Pleasant Bay Capital Partners. It is led by Larry Neiterman, former head of Deloitte’s life sciences and healthcare practice, and Jeff Barnes, former North American commercial head for Phillips Healthcare.